tv Fast Money CNBC December 20, 2016 5:00pm-6:01pm EST
$100,000, i think it was. >> something like that. in their earnings report. we did this and the other, and by the way, we achieved a record number of wedding proposals for our alexa platform. anyway, that's the latest on amazon there. michael, stephanie, thank you for joining us today. that does it for "closing bell." "fast money" begins right now. ♪ money money money money >> it was close, but no cigar. the dow inching toward the key 20,000 milestone, getting within 13 points of the big number before retreating slightly. still a record day. the dow closing at a record high for its 17th time since president-elect donald trump was elected november. the nasdaq also closing at a record high. and check out where we stand right now. the financials leading the rally up 19% since the election. telecom and energy up double digits. on the flip side, utilities and staples down 1%. at this point, is it more dangerous to put money to work or to wait on the sidelines? tim. >> it depends what you're buying, mel. if you think about sectors that
actually are reflective of asset prices that i think could go higher -- housing, for example. if you think about what's going on in interest rates, that is a positive. gets people off the sidelines, banks more inclined to lend. housing prices are not at their cycle peak. in fact, we're still kind of at 2007, look at equities. i think oil, things related to the reflation trade, still things you can buy. and i think financials. so we thought -- i thought we had a rounding top on financials. today's price action was very, very encouraging, a consolidation and building another base. >> karen? >> well, i look at the question a little differently. not all or none. so there's a lot of gray in there. if you owned no equities, even with this rally, i think you should. because i think a lot of the building blocks that made this rally are still in place. even though you're looking at it from a higher base. plus if you own no equities, a higher fixed income, to me not as attractive. in the short-term, it will bounce back. but i think you've got to bite the bullet and own some. you don't need to jump in with both feet.
>> what do you say? >> i've been a repeat buyer of the s&p. and i buy that through sprds. also owned and held, sold it. every sale since the election has been a bad sale. so hard, because people rotate. one day buy the financials and energy and the next day buy reits, utilities, and industrials. what are you going to do when you're rotating through. if you own the s&p, you own the whole market. so for me, instead of trying to pick and be smarter than the next guy, i want to own the market. i do believe the market is going higher. but having said that, there is nothing wrong with taking some profits after we have seen the run that we have had. >> right. >> even though i think the market still has more legs. >> embedded in that question is a term you probably hear us talk about a lot. risk/reward. what's the risk to the up side versus the reward to the upside. >> i don't think it's very good. let's be frank. tim said something that something is associated to the
reflation trade. there is no reflation. it's been better over the last couple months. consumer confidence has gotten better but not for a whole host of the reechbts -- >> do you think it's not coming? >> i'm saying it's very uncertain. what i'm saying, when you look at the dow going towards 20,000, okay, and it's up 10%, basically in a straight line since november 8th, i think it's discounting a whole heck of a lot of stuff that may or may not happen in the new year. what i'm saying, i don't think you have to chase it. a lot of people want to hold on to gains. i think a lot of people headed for the door at the same time in january. and you have to look back to the last couple january/februarys when we didn't have these massive parabolic rally, we did have a lot of volatility, a december period where things evened out a little bit and then went straight down. >> did you say we have had no reflation? >> no. if you're talking about economic reflation versus the market, absolutely reinflated, yes, i got it. it went up. but i don't believe the reasons it went up for, you can take to the bank in 2017. >> so interest rates higher and
the moves in commodities higher, those things aren't valid? >> i think the move in the ten year treasury-year-old above the s&p dividend yield, not that positive for stocks all together. >> but clearly, the feds -- the fed and several banks around the world have tried to inflate asse assets. and, in fact, inflated stocks. we may have a bubble, may not. although, again, i don't think you've been saying bubble. but ultimately -- >> i don't think a bubble whatsoever. >> assets have to go higher. think about where everything else has been moved. and if you think about hard assets, again, housing prices -- i know it's tough for people to buy a home. housing prices at 2007 levels, not 2016 levels. oil is probably still cheap relative to the stock market. and to not look at these relationships, it's not looking at market. >> let's look at the dollar. most companies guided in mid to late october, the dollar index is up nearly in a straight line. multinationals, expected tore beneficiarie beneficiaries, utx, honeywell, we have seen them guide down.
i think, actually, the move is actually discounting a lot of the potential benefits, and we're going to get a sense -- i don't really think q4 earnings are that important. but i think it's 2017 guidance. >> i understand everything you're saying. you can't argue with it. the market does feel topee. the market does seem to have priced in a lot. but we haven't looked at real growth in eight years. we don't know -- even what it looks like. >> we don't even know -- >> half a trillion fiscal stimulus play. we don't know we're going to get tax cuts. >> i hear you. >> the sentiment is out of control. five people -- >> tax cuts are probably the thing people say are the most likely thing that's going to happen. >> maybe. >> this is going to be the biggest overhaul. the question is, is it more dangerous to be on the sidelines. right? >> are you going to miss out more than you can lose being in? >> what i would say, at this time in the market, there are still more people on the sidelines than probably not only want to be, but i think there's actually a lot more people on
the sidelines than you would see at this stage of a market. and that is going into a new year and going into -- >> is that a good thing? >> yeah. >> you can buy places that still haven't run. i'm not going to reach out and buy stuff -- >> it scares me. >> there are things i think you can buy. >> financials can be overbought but they still can be underowned. a lot of funds still have to reach. they don't want to pay these prices. no one wants to pay, quote, unquote, top dollar. they have to be there. >> well, i feel like -- >> other than i think we heard talk about a big reweighting between because of the outperformance of fixed income other than equities. other than that, that would be a short-term pressure on the market. i think we talk a lot about taxes, people waiting to do things. i think that allows for some -- you know, levitation, even above where we are right now. i don't understand why you don't think anything has happened that there is a meaningful shift. i know you dismiss the likelihood of tax likelihood of
infrastructure. the likelihood hasn't gone up. >> we are -- we are at record low volatility levels for the most part for all intents and purposes. we have a president-elect who wants to dictate foreign policy and economic policy via a twitter account. if you don't think we are going to be in a different volatility regime in 2017, i think the fact that people know there is a steady hand still in the white house right now. >> i totally agree with that. isn't that an opportunity? you have an opportunity to buy this market and protect yourself at amazing levels. to me, there is it stuff i own right now, especially in global markets where there is a lot of currency volatility where i'm being more aggressive on places i think actually are cheap. >> i would think that would allow you to be in the markets with less fear. >> sure. but listen. it just depends where you think we're going here. listen, since 2002, how many years has the s&p 500 been down? how many years has the s&p 500 been down since 2002? you guys know the answer? one. one year. and it was 2008. and the financial system as we know it, the economy, and the markets almost collapsed. and here we are --
>> so you shouldn't be in the market. >> what i'm saying is, i'm not trying to scare anybody. what i'm saying is, the question very simply was, should you be buying stocks here if you missed out, okay? we're at record highs. and i would say no. i think you're going to have an opportunity in january to -- >> so you go back to 2001, you should have been investing all along, of course, and buying on those dips, because the dips become shorter and shorter in duration. >> all this said, what did you do today? >> not a lot. buy more s&p protection. we talked about volatilities just now. it's so low. and if you want to stay in the rally and you don't want to trade around, which i don't want to do, it's a way to have protection and be able to feel comfortable and inexpensive. >> i trimmed some airlines and at&t. and these are things that have been on a wicked, wicked run and gets back to this place. i think the transports, as much as i believe that they have been an indicator of, an economy. et cetera, et cetera. are at price multiples that are very difficult to finished. fe
fedex, i don't agree. but when i look at the rails and i look at some of the things -- and at&t, this to me is still a yield play. i know that time warner deal is something that is probably created in terms of a structural change. this stock back at the july highs. take some profits. >> grasso? >> i've been a repeat buyer of spiders, put pulte, kb homes. home builders, i think, are a sweet spot. everyone universally sold them. you're going to see a flood. household formation is ticking higher. not near levels where people think it's saturated. i do think that's going to be a knee-jerk higher once people understand they sold out of fear of a rate increase. it's not even close to historicals. >> not a big enough move to affect the housing market. in fact, if we move with the markets priced into the fed for 2017, that's actually bullish for housing. >> and i'm not buying anything. i'll tell you why. there are a lot of people in early january who will wake up and see their 60/40 allocation. >> and a memo of last january will kick in.
early last year. not a good time. >> but i think it could. and the biggest issue is, i think the sentiment shift would so fast, this way, you know -- so to me, i think you'll have better opportunities in january and february. >> be short? >> and we have this little segment called "options action," we'll do that in a little bit. and i think options prices, to karen's point, if you're nimble and want to make directional, there you go. what are some stocks in the index still worth a buy? let's go off the charts with rick roth. rich, do tell. >> thank you, melissa. in terms of the broader market, too far, too fast is simply too common a refrain to work. three great ways to play this rally. to your earlier points, what i love about these charts, they have been laggards. first, apple. we have a very bullish set up here. this is a stock that has fallen off many radar screens. a decline, very similar to what we saw back in 2012 where we took 40% off the top. but tested and held that 200
week. built a nice base and 140% surge coming out of it. once again, test and hold that 200-week moving average. we build a base, break over the neckline, retest the old highs at 135, and we could see 150 over time. and apple. so there is a nice name right there. then we move into disney. look, at mittedly, it did work. we had a very nice bull backe. nice if you didn't own it. these aren't the droids you're looking for. you move the 200-week moving average. and reasserting itself above. you can retest the old highs at 120. this is a stock flat on the year. so real laggard here. and finally, we talked about housing. steve mentioned it, tim mentioned it. look at home depot. the stock hasn't done a lot for the last two years. very much like the two years from 2013 to 2014. what happened then? strong rally coming out. we break out to the up side. and home depot, a laggard this
year, as well. up 3% versus 14%, starts to reassert itself. high-quality names that lagged the market this year that can lead the market higher next year. it's not too late to buy these names or the market more broadly speaking. >> i would like to invite -- rich, do you have time to come over? do you need to go to a phone booth and change outfits? come on over. nick, thanks for bringing the chair over. clark kent is going to join us. we are having debate. i want to get into the individual stocks. a debate about the overall markets. how do they look? >> the markets look strong. it goes without saying we have had a very big move. the last three januarys have been down. we haven't had four down januarys in a row, let's say ever. i'll take it back to 1950. i don't think this is the year that we get that streak. you have a very bullish set up here. very different from last year. last year, where were with he? curb was going the wrong direction. yields going the wrong direction. crude going the wrong direction.
transports, energy, cyclicals, value. all going the wrong direction. russell. a very bearish brachdrop. now we go into the year with all of the trades going the opposite direction. breadth is expanding, cyclicals. you know that litany. so for me, too far, too fast, is simply too common to work and i think the markets can go higher. and i think january can go higher. >> rich, what do you think about financials? this is what everybody is talking about. and some level, the most interesting charts to look at, about we getting rolling tops on the data fed and you can make an argument that was the day these things rolled. today they roared back. are you back in the game? >> yeah, i think you just don't leave the game. i'm not smart enough to be able to top tick these to dance through the raindrops to get you out and put you back in for this correction, given the fast-moving situation that we have -- >> i don't know. >> a drinking game. >> you would be surprised. that being said, i think interest rates go higher. we're going to see a three handle. the curve is going to steepen and the charts breaking out from
multiyear periods of underperformance versus the broader market. earlier, dan mentioned that sentiment has shifted in binary fashion but positioning not there yet. the charts have moved so quickly, you haven't been able to get the positioning to catch up with the sentiment. that will happen early in the year where the position catches up with the charts and the sentiment, which has turned. >> let me ask something. 20,000. we make a big deal about that big round number, and investors -- actually, maybe average guy in the street doesn't notice until we hit it. how much of a difference if any do you think that makes for getting additional buyers into the market? >> i think it's nice to talk about on tv. really just the icing on the cake of a very bullish backdrop that we have laid out here. markets like big round numbers like 20,000. psychology weighs on the tape. so perhaps getting above that level. but it's really a fait de compli at this point, given the bullish set, cluster of evidence. important for the person on the street but the institutional investor is not paying too much attention to these big round numbers.
they make bigger headlines than trading strategies. >> did he d fait de compli. >> basically said you're wrong. >> i'm wrong a lot. i do believe in the fact i have never seen sentiment shift so quickly, given so many uncertaintie uncertainties. can i talk about apple? >> sure. >> we all know apple is cheap and going to be a huge beneficiary from the cash coming back, if that happens, who knows. but the bigger problem with apple, it's gotten almost back up to the level that gap down from in october when they gave weak guidance through this quarter. they're probably going to hit the guidance. then what happens for the balance of the year. and that's really important, i think. i would be hard-pressed to see this stock breaking out, if they are unable to really give the street guidance now that expectations are higher as the stock has gone from 105, basically to 117. that one worries me a little bit. i wouldn't be praying for breakout. >> you like home depot in conjunction with the home builders? >> i think home depot works.
the flip side, we have had a blast of cold air. that is actually bullish for home builders, because that supply is limited because they're not building homes. bearish for home depot, because people aren't buying the product. >> you mean like shovels and stuff and salt? >> i don't know if that's really where they're making mare bread and butter. people will go and buy supply wood if you have a storm here and there. but cold weather is negative for home depot, positive for home builders. fedex lower. nike higher. we'll hear the latest from the ceos. then, sitting on big gains will break down how you can protect all the money you made in the stock market this year for two bucks. and this stock up more than 200% this year. one top analyst says there is more room to run. he's here to make his case later this hour. much more "fast money" still ahead. miles per hour. over 200 to win, every millisecond matters. both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every
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tadirectv now. stream all your entertainment! anywhere! anytime! can we lose the 'all'. there's no cbs and we don't have a ton of sports. anywhere, any... let's lose the 'anywhere, anytime' too. you can't download on-the-go, there's no dvr, yada yada yada. stream some stuff! somewhere! sometimes! you totally nailed that buddy. simple. don't let directv now limit your entertainment. only xfinity gives you more to stream to any screen. welcome back to "fast money." an earnings alert on fedex. morgan brennan back at headquarters. >> fedex's conference call under way right now. chairman and ceo, fred smith, killing off by saying so far this peak holiday season has been a record for fedex and with the exception of several local weather issues, service has been, quote, outstanding. also explaining that the traffic
mix is different this year, due to the calendar. >> our traffic mix this year is a bit different by design as part of our longer-term commitment to continue to grow earnings, cash flows and returns. christmas falling on a sunday has created anomalies in shipping patterns, and this week will see disproportionately higher demand versus other holiday seasonal patterns in the past. >> so that will certainly be in focus with a last-minute speak in the online shopping we have talked about. on the call, smith also saying that the integration of tnt express and the continued integration with genco are going well. the integration expenses expected to peak next year in fiscal year 2018 and operating margins widening, starting in 2018, 2019 and 2020. fedex expressed peak operations will have profit improvements and also note worthy, fedex
ground results will be affected this peak season due to the recent opening of four major hubs and 19 automated stations, as well as an effort to grow ground traffic in a more profitable manner that we saw during last year's peak season. so the conference call as we mentioned, still very much under way. we'll hop back on right now and bring you any more headlines as they come. shares of fedex down 3% in after hours. >> any reason behind the decline in operating margins in the quarter compared to last year? >> yeah. so still talking about that very much. but we have seen in general with fedex, as they have plowed money into expanding the network, particularly in the ground operations, that's really what's been pressuring the results there. even as we have seen in the last quarter, the average daily volumes for ground increase 5%. >> morgan, thank you. we'll check back with you if there is news. you're talking about fedex specifically. they had to spend money, obviously, in order to meet the peak demand, ever increasing
demand. >> i don't think this has an impact on retailers. for these guys, weaker ground margins. really, really easy. the express margins weaker. tnt integration going well. people would love to buy a big pullback on fedex. nothing wrong here. >> yeah. >> the cost being a little above where they thought, that is a good thing. i think that's not -- some of it sounded like i think she said -- 18 distribution centers. those kind of things tend to be lumpy. so i would sort of look through that, at least as it relates to customers. so i agree with tim, though. >> you're talking about big selloff and the stock down 3%. it would be up. the stock up 66% from its january lows. 23% on the year. so to me, i don't know what's really changed between now and september when it's up that much or, you know, in january at one point, yeah, down 20%. to me, i don't think you chase stocks like this that have been up like that. i think there is an opportunity, again, and this is a great example of a stock, where did it break out? 180 or so, just a month ago.
you know what i mean? i think you let some of this stuff come to you. i know fedex is the cheaper of the two. >> it is. >> than the u.p.s. so, you know, fine. down a few percent. we may see this into the new year. >> i talked about the rails and wherever you want to put fedex, these guys have total i think margin accretion. the tnt integration is very, very big. i think their ground express is something that has huge operational leverage. this company is doing everything fine. >> quick on the read-through for retailers. >> retailers are going to battle the border tax adjustment. it's going to be a tax play for retailers. i think fedex up 33% year-to-date. dan said, u.p.s. up 2% year-to-date. we are all hoping for a pullback but a lot of times you don't get it. maybe you nibble here even though they're sucking helium at this point. >> still ahead, check out shares of nike, the biggest loser on the dow this year, moving higher after hours is the worst behind the stock? we'll hear from the ceo. i'm melissa lee.
you're watching "fast money" on cnbc, first in business worldwide.. in the meantime, here's what else is coming up on "fast." >> look, up in the sky! it's a bird! >> it's a plane! >> it's just the stock market. if you're worried about a pullback, relax. we have a way to protect your portfolio for just $2. >> $2. >> that's what i just said! plus, one stock is up over 220% this year. and a top analyst thinks it can go even higher. the name and the man behind the call when "fast money" returns.
points. here's what's coming up. nike shares up 5% in the after hours, all things being equal. that would be good for about 15 points in the dow tomorrow. can it be this stock that gets us to 20 k? we'll discuss that. plus, worried about your portfolio as we led into the new year? fear not. our very own dan nathan has a way to protect your gains. the dow coming within 13 points of 20k. the moving giving wall street a flash back to another important milestone for the index when it hit 10,000 back in 1999. dom chu is back at headquarters giving us a walk down memory lane. >> we all love those strolls down memory lane. but the world today, melissa, looks a whole lot different than it did when the dow first crossed the 10k level when it closed above the five-digit level for the first time ever. the index crossed that level roughly 180 times thereafter. and we have been solidly above since. let's look back at the current
members of the dow. good news first. the top five biggest percentage gainers among those current members of the dow since that date, you've got boeing up 3 ooh%. 3m, and nike, and then it ra s really astronomical. apple up almost 9200%. on a split adjusted basis. for the biggest percentage laggards, cisco, verizon, ge and american pfizer. also worth noting the dow of today doesn't look like the dow of '99. back then we had alcoa, at&t, citigroup, gm, hp and the stock formerly known as phillip morris. today, apple and goldman sachs. you've also got nike and united health. home depot, microsoft. so, melissa, a slightly different feel with today's dow
in our stroll down memory lane. back over to you guys. >> absolutely. thanks so much, dom chu. dom at headquarters. okay, so i guess there is a couple components to this. when we think about 1999 and when the dow crossed 10,000, and within dom's hit, implied we sort of just stagnated for many years after that. do we have the same setup as we cross 20,000 in your view? or things much different? >> i think things are much different. there was a part -- i'm not exactly sure. there were some numbers that were crazy in that 10,000. that were really ridiculous and then some value stuff that just traded terribly. i don't think we have that same kind of dispersion. i mean, i don't know. pets.com at the time was trading -- >> right. >> literally delivering kibble. and traded at 5,000 times earnings. i think this is different. >> yeah. >> just so you know, uber is losing money on every ride. i'm just saying -- >> a lot of comparisons. you can say, one of the biggest market cap companies in the s&p
500 and private market valuation at $60 billion. >> it's not public. >> hold on, tim. but a lot of those -- a lot of investors are the same who are mutual fund compounds and we have seen this before when they started marking down some of the private investments, we saw swoons in the market here and there. so i don't know. i mean, i think they have to be -- >> characterized by the retail guy buying the top. and to say a stock not trading publicly is indicative of the same market, i don't think so. what is interesting is something like citibank is down 85%. some of the financials like jpmorgan, some money-losers and eradicated capital. >> the first time we have seen the potential for growth, and karen has pointed this out and this is -- i feel like it gets a little lost in the weeds. when you talk about the biggest tax overhaul in 40 years, this is a huge for corporations. this is a huge change for
individuals. this is real growth. >> key word. >> when you talk, those are -- >> dan let me asking -- >> winning or making changes -- him making tax changes with the house and senate. >> i just -- >> i think they're -- conte distributions in almost every one of these big proposals. >> i want to -- >> you can have this argument forever. >> you know where the ten-year treasury yield was in 1999 when the dow crossed 10,000? 6.5% or something like that. so it's -- it's a bizarro situation, we're much higher for all intents and purposes, but in a different interest rate regime? >> way better. much better right now. >> i understand. >> supportive of stocks. >> what i'm saying is, we've turned it upside down. is what i'm saying here. much higher. >> all these things -- i understand why you were negative. i don't understand why you got positive on a lot of these -- even if it is -- the market has discounted. is that the premise?
that all of it is in. >> very short-term period. >> i don't think there is anything wrong with skeptical with the market priced. exactly what dan is saying. and i think to expect the tax reform -- to be exactly how president-elect is talking about it. >> we can have this conversation for a long time. i got off dom. dom mentioned a lot of stocks in the dow. laggards and winners. we buy any of them. >> verizon. i think you could buy a verizon. i think apple is over. if you really look at apple, peak iphone sales, why everyone bought apple. >> is 8 coming up this year? ecosystem. think about what everyone was so fray afraiding of losing their itunes. now so many streaming opportunities. when was the last time you sat at home on a computer? you don't sit at home on a computer any more. you do all of your computing from your phone.
you don't need as much as you did ten years. >> i would prefer to look at nike -- under -- it's underperformed by 35 -- >> you say i'm going to sell if it breaks 50. >> whatever the "options action" trade is, we'll learn about on friday. but ultimately, we're at a company here which fundamentally i would say -- as strong as they have been -- on a relative basis, it is -- >> do you know what the tax headwinds could be? huge sell. >> so what, to know surprise, you guys are on opposite sides. >> dan has got a simple strategy. >> yeah, so let's look at -- >> yeah. let's look at the etf that tracks the dow jones industrial average, the dia, a price weighted average. and we know that two stocks, jpmorgan and goldman sachs, up 33% respectively, making up 10% gains since then. let's say you own goldman sachs,
for instance. and you have a bunch of other -- fail weather stocks, dow jones stocks and booking profits that have gone up far, fast, you know the drill here. one may to maybe swap out of those, take some profits, not too particularly concerned about paying taxes in 2016, about you want want some exposure in the documentation, look to dia. one of the reasons you consider a stock replacement strategy here is to give you that exposure into the new year. maybe worried about a potential selloff. the idea here on a stock replacement, let's say in the goldman sachs or jpmorgan, that sort of thing. but you want to stay in the game. while also defining your risk. so let's go and look at the dow jones industrial average. this is that 10% rally in nearly a straight line. i suspect at some point in january, we're going to have a move back to those breakout levels. the other point here, this is spot fix. this track volatility on the s&p 500, obviously not the dow jones industrial average. but look at what's going on here. we're near, you know, multiyear lows. i just want to bring up, these
are these volatility stocks. that was after august of 2015. this was global growth at the beginning. year. this was post brexit. this was the election related. right now and this is the point i've been trying to make throughout the show. i don't think the market sentiment really tracks some of the risks going on right now as we head into the new year. so let's look at the dia. the diamond. etf that tracks the dow jones industrial average. when it was trading at 199.50, you could look out to january. the president-elect inaugurated and you could pay about $2 for that, 1% of the etf price. so above 202, you would have gains, okay? but you're basically stopped out down to 198. i like the risk/reward for a trade like this if you're looking to book profits. back to what karen was saying in the beginning of the program, she is staying long, what she
owns and looking to buy puts. it works the same way on the other side. but just understand, if you're long stocks, and long a put, you're basically long a call. my trade is more that if you're looking to book gains, because you just, you know, goldman sachs has gone up 33%, a big part of that dow. this is one way to keep some of that economic exposure in the dow jones into the new year. >> how do you decide, karen, to do something like this, versus holding your position? >> thank you for asking that. it's really important. taxes. that's how. if you have long-term gains that you don't want to realize in 2016, because you think 2017 may offer a better tax situation, but you want to take some money off the table, if it's already long-term, buy puts and not have to realize a gain. wait until next year. >> dan, thank you for that. for more "options action," check out the full show friday, 5:30 p.m. eastern time. coming up, nike shares are up more than 5% in the after-hours session. nike, the worst-performing stock in the dow this year. it was a top-performer the year before. we'll hear from the ceo and how
he plans to turn things around. plus, the one stock that tripled in 2016 and one analyst says there is even more room to run. we'll give you the name and talk to the man behind the call. you're watching "fast money" on cnbc, first in business worldwide. ♪ guyhey nicole, happening here? this is my new alert system for whenever anything happens in the market. kid's a natural. but thinkorswim already lets you create custom alerts for all the things that are important to you. shhh. alerts on anything at all? not only that, you can act on that opportunity with just one tap right from the alert. wow, i guess we don't need the kid anymore. custom alerts on thinkorswim. only at td ameritrade.
shares of nike jumping on earnings. sara eisen has the latest. >> hi, melissa, this tone of this call is certainly something different from nike. it is an extremely upbeat and bullish tone from all of the executives. they are confident and energetic. and that's a change in what we have heard from nike management. clearly they are trying to change the narrative on this stock, and on this company. they're talking about a return to growth in the second half of the fiscal year, which they are starting in right now. talking about gross margin getting back to expansion, something we did not see this quarter. and talking about inventories getting back in line. here is ceo mark parker, opening the call. you'll see what i mean by the upbeat tone. listen. >> i think there is a misconception that growth in our
lifestyle business comes at the expense of growth in our poerpgs business. the reality is, they fuel each other. performance and lifestyle are not tradeoffs. consumers want innovation that is style-right. and they want style with real innovation. it's no surprise that our industry continues to attract competition. as in sports, competition is a positive thing. it sharpens our focus. >> clearly, that is the message that nike wants to communicate today. as far as specifics, we heard from trevor edwards, the number two on the call. he says the apple watch that they are doing in partnership with nike is selling way ahead of plans. he said, to be clear, basketball is back. using that sort of firm language again. they did recognize that two of their signature styles on basketball were not resonating with consumers. trevor edwards saying they went back, redesigned them, delivered a better price value on those,
and that they are seeing results. he pointed to the fact that this is the tenth consecutive quarter of double digit growth in china. he also said, we still see tremendous potential in north america, which you'll remember, melissa, one of the sources of concern of analysts and investors going into this call. he said make no mistake, on 2017, we will stay on the offensive. and then the cfo went on to talk about some of the specifics, like the fact that this company is still posting 6% global sales growth. that would have been 8% without the impact of the stronger dollar. 17% direct to consumer growth. i think the numbers came in as a beat, nothing is very impressive. higher inventory growth, for instance, than sales growth. but it was the tone of this call and the talking up of the bullish forecast for the second half that really is fueling this stock movement right now. >> we're showing a banner at the bottom of the screen. future orders up 2%, ex currency below estimates. the estimates for 5-plus
percent. do you think the stock would act more -- trading at after hours session highs. why do you think that is? >> management has gone to great lengths to communicate with investors and media. futures orders not a good snapshot in terms of demand. their direct to consumer model, their business that has grown so much and continues to grow double digits is not reflected. the futures orders are a snapshot of six-month orders from retailers and they have invested so much and grown so much going straight to the consumer that they're not even publishing the futures orders in the release. they're talking about it on the call, just to give a snapshot of what the retail landscape looks like. but they're also talking about the fact that you could see revenue growth outpace the futures orders. they have communicated it a number of times. and it's probably why you might not see such a big reaction any more. it used be the way, you know, that nike traded. this is a little bit of a different narrative and investors have to get used to it. it's also a completely -- i
listen to these earnings calls every single period. you have never heard the companies' executives so energetic. they're in fight mode and ready to compete. >> sara, thank you. sara eisen, the latest on nike. is this a turning point? i think the commentary about gross margins, q1, 2016, fiscal 2016, they had 47.5% gross margin, tracking above 46. that is the commentary that makes growth investors get back into the story, especially when you consider how it's really underperformed and that is one of the main reasons, i think. >> it's really amazing when a company can say don't look here any more. this is a much better way of looking at our business. >> it does make sense. and i think they set that up last quarter, not releasing now. by the way, we're no longer going to do it. that is interesting. our answer makes perfect sense, why it is, you know -- why we should focus on it less. to me, i've been playing it through foot locker, which i think has a much better -- much better metrics in terms of valuation. the point that steve talks
about, this potential border tax, foot locker would have less than nike. but it's either great, because the pie is growing or regaining share back, one of the two. either is good for nike. >> i look at it through the prism of corporate tax reform on this one. so nike is going to have the headwinds of the border tax. >> also, they are 50/50, whether it's domestic versus international. their effective tax rate -- 85 domestic. >> if they're growing their business at the same time. >> but they have been so oversold and that's the reason nike is up. >> yes. >> these guys trade at a premium for a reason. what happened to that? these guys are maintaining global market share in a market that is growing. and, again, sell-through is more important than sell-ins. they know their business. >> the bar is low. got more room. still ahead, the one stock
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four shares of invidia. goldman today adding the name to its conviction buy list. and there is even more room to run for the chip maker. why? we are joined on the fast line for our call of the day. raised the price target to 115 from 80 bucks. vj, this is after a torrid run. the stock up more than 200% year-to-date. in terms of the 27% extra upside, what is a primary leg of its business that is going to get us there? is it ai or vr or gaming? >> yeah, thanks. just briefly, we obviously think there is more to go here. a couple things to put this in perspective. if you look at ai, only 1% of service globally today are dedicated to ai. this market is expected to grow 10x in the next four years.
$85 billion market. and 1 to 2% share of that. so between the market going 10x for ai, and having 1 to 2% share, we think there is a lot of room for this to move. >> okay. for invidia, a lot of people are going to criticize analysts like yourself for raising price targets after a huge run. you're not scared of that. you're not scared there is going to be a rotation out of the name? because it's moving so fast. >> no, no, absolutely. i think that is definitely a risk when stocks move that fast. but i think, again, to put this in perspective, ai is a big long-term secular growth team here. it's financial computing. and for invidia specifically, the gpu gaming site has been growing 59% year on year and the data center side is growing almost 200% year on year. so almost a billion-dollar run rate up from $400 million last year. so obviously, growth and numbers
that invidia have kept pace with the move in the stock. so, again, this is not over yet. because by any means, we still see ai. >> vj, thank you so much for phoning in, appreciate it. vj vjr rakesh. >> you wanted to take credit -- >> when you say it like that, i'm just quoting you. >> i've been talking about it for quite some time. it does feel as if -- this is obviously moon shot. you can see the year to date performance. it seems it's almost pricing in a takeout story. and the stock -- if you look at the market cap -- it just feels like this last wind, internet of things and the connectic car. it seems like it's really -- >> no mention of takeout in -- why say that's a possibility? >> i think a market cap is becoming very difficult when you think about what the multiple would be. we had some massive, massive
deals over the last year-and-a-half over the semiconductor space. >> huge. who is to say that competition is not going to get a lot bigger in the space? the self-driving cars, personal assistants, the ai -- these are places -- some major, major players operate. so when you trade at 40% premium to the pe of other high-growth tech companies, at some point, steve -- >> although, he's arguing the whole pie is growing. >> and expect -- >> you're arguing the whole pie is growing. >> xpi gets taken out. >> off the heels of that, you have seen this massive last leg. and i would say that if you look at the connected house, the connected car, the connected everything, invidia is a much better buy. >> but i think what happened here, and this is just -- let's say my layman's opinion, these guys went from being the leader in graphics and this position in ai -- for ai processes and all of a sudden went ballistic. they just talked about -- so when you talk about competition,
there aren't too many people who were able to switch gears like that, the way invidia did. and it's just a scarcity thing. >> you like them. >> well, listen, i can't -- i just want to make one quick point. the goldman sachs analyst who put $129 price target, he's been walking it up the entire year. so the guy is not some johnnie come lately. back in the olden days, a high-profile analyst would put a number on it and the stock would go straight there. it better go straight there or we're going to talk about the conviction list for a long time. up next, the industrials. more "fast" straight ahead. what's the value of capital? what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter.
and last but not least, the latest craze when it comes to beauty pageants. camels, dozens, in fact. in the united arab emirates, strutting their stuff in front of crowds. judges rank them on criteria, including, firmness of the ear, straightness of the leg and the size of their toe. >> the toe is always referred to -- >> um -- "final trade." tim, we're leaving it alone. >> industrial metals, freeport. jump back in. >> karen. >> a trade i hope loses money,
s&p push to protect the portfolio. >> you guys are snickering. >> huge massive tax overall. h & r block. >> what did i miss? >> i'm with her. >> i'm melissa lee. thanks for watching. see you back here tomorrow at 5:00 for more sigh e. my mission is simple, to make you money. i'm here to level the playing field or all investors. there's always a bull market somewhere and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want it make friends, i just want to make you money. my job is to educate and teach you. now it is you'll about the prism. the prism we put a our thoughts through. a